India's windfall tax on oil companies and refiners, introduced last week, could stay for a very long time, as the government plans to withdraw it only when oil prices drop by $40 per barrel from current levels, Indian Revenue Secretary Tarun Bajaj told Reuters on Monday.
India last week introduced a windfall tax on oil producers and refiners who are exporting more due to the high international price of crude oil and refined products. What's more, fuel exporters will be required to sell at least some of their product domestically. The new taxes will serve as an incentive to keep more product at home and export less-a reality that will further tighten international markets for oil and oil products.
"As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market," a government-issued statement read.
The windfall tax took effect on July 1 and could be in effect for a very long time, considering that India says it will terminate the windfall tax only when international crude oil prices fall by $40 per barrel from current levels.
Early on Monday, Brent Crude was trading at over $113 per barrel, up by 1.32% on the day.
Related: India's Top Refiner Sees Oil Staying Above $100 This Year
Speaking to Reuters, the Revenue Secretary Bajaj said today that "The taxation would be reviewed every 15 days."
"If crude prices fall, then windfall gains will cease and windfall taxes would also be removed," Bajaj added, noting that the government expects windfall gains for oil firms would evaporate once the price of oil slumps by $40 a barrel from current levels.
India's imports of Russian crude have soared in recent weeks as its refiners take advantage of the steep discounts at which Russian grades sell relative to Brent. Many refiners have also boosted their fuel exports to take advantage of the high refining margins globally amid a fuel crunch in many regions.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More